OT: US Pres election

[PashaDawg]

Originally Posted by Trumanator

^very nice

I find it intriguing how people can revile Bush as an idiot and yet at the same time believe that he had the guile to bamboozle 3/4 of the fairly even Congress. As for deregulation leading to the current financial crisis, thats actually backwards. So much pressure and regulations were brought to bear on lenders to provide loans to people who were not going to be able to pay them that the mortage meltdown was almost guarenteed. As for an 8 year Gore admin... I wouldn't be surprised if we had gone through half a dozen attacks. Unless 9/11 was a conspiracy too...

Sounds like you're a dedicated member of the Republican Party. I didn't accuse Bush as being an idiot. I actually think he and his administration are smart people who knew exactly what they wanted.

With all due respect, it sounds like you misapprehend the whole dynamic of mortgage backed securities. In the late 1990's and through 2006 (maybe even 2007), there was a dramatic shift in lending practices once the whole mortgage-backed securities concept was developed. The entities that were initiating the mortgage loans did not intend to keep the loans. They were to be sold to Wall Street, and then sold to more investors. So, the initial lenders had little worry about whether the borrower could afford the loan or was trustworthy. (Compare this to the more traditional arrangement of a bank lending money to a home buyer and retaining a mortgage for the life of the loan.)

As these loans became more and more profitable (because there was *a lot* of money to be made), there was increased pressure from the free market to find more borrowers. After the sources of responsible, reliable borrowers were tapped out, the mortgage industry needed to lower their standards for qualifying borrowers for loans (e.g., shifting from documentary proof of income to no such requirement). Again, there was no concern for the loan originator, because they planned to sell the loan to Wall Street. They just wanted to collect their initial financing fees, which were substantial.

To keep the customers coming, the industry devised inventive types of loans to get less loan-worthy borrowers into higher priced homes (e.g., adjustable rate mortgages and interest-only mortgages) that eventually trapped borrowers who bought homes that they probably should never have purchased. For example, the adjustable rate mortgage would have a 2-year teaser rate that was more affordable, and when the rate eventually adjusted after 2 years, the monthly payments would jump up substantially. (I think it is a two way problem. The home borrower was not paying attention to what he/she could afford, and the loan originator was pushing to lend as much as possible (to get higher fees) while disregarding the likely ability of the borrower to repay.)

In the end, we're now facing a crisis of millions of defaulted loans that are the basis of huge Wall Street investments. The problem was exacerbated by the runaway housing market and the difficulty in fully understanding and keeping tabs on the investments, because numerous parties would have fractional shares in the bundled up mortgage backed securities. Again, the pressure was from the free market. It was *not* from any regulators forcing Wall Street investment banks into buying mortgage loans.

Thus ends my second rant.

Pasha